Do I pay this HELOC bill or not????

[ssmdem]

I know -- there are no guarantees either way -- but just can't decide when to quit paying this bill. The scenario is that it's a rental property where the rent pays the 1st mortgage but only part of the 2nd mortgage. I'm having to come up with $150 extra a month to make the interest only payment, and about $350 to pay the principal as well.

We're filing bankruptcy, surrendering our home and this property. We are planning to stay in our own home until the auction. At that point, I would like to move to the rental property and stay there until it is sold at auction. Right now, we are 4 months late on our mortgage - this rental property is current.

I'd really like for this rental property to foreclose about 9-12 months after our current home does. Any suggestion on when to quit paying that 2nd mortage and be able to come close to that? Yes, it's a second mortage -- but the 1st mortgage is $88K, 2nd is $80K - home is worth about $135K, so there's a substantial amount of equity with the first mortgage, and both loans are at the same bank, so I'm looking at it as a regular foreclosure timeline, but wondering if the fact that the 1st mortgage will be current might extend it out just enough that I can quit paying this 2nd mortgage in the next 1-2 months. Any thoughts?

We can keep paying the additional $150 a month, but I would really like to NOT if it's pretty safe to quit paying it now. We do have a tenant in the house, but I feel safe that she will be able to finish out her lease without any worry at this point. All of her rent is being paid towards the 1st mortgage which is why it is current. Just thinking about discontinuing the 2nd mortgage this month.

[iv65536]

In which state are these properties?

[ssmdem]

They're both in Florida -- BUT, we're in Northwest Florida -- not the same real estate foreclosure issues as central and south Florida. Timeline for our area is about 18 months AT BEST from last payment. I'm really not counting on more than a year for each. I'm just wondering if I can count on the rental foreclosing at a slower rate because SOME of it is being paid.

[ssmdem]

Well, it's now past due - and I'm wondering if I did the right thing.

I do not want to reaffirm this loan, but the mortgages combined are more than what the IRS allowable amount is in our state. Should I keep it current so that I can use it on Schedule J as our mortgage amount? If the HELOC is not current at the time of filing, will they still allow us to use that amount?

And if I'm not paying the HELOC, than that actually gives me an income from the rental - which I definitely don't need. Dang it - guess I just blew that late fee!!

[Mizzou13]

Would there be any issues if you just stopped paying the first mortgage on the rental also and collected the rents until the bank foreclosed? You would most likely be in a better position than trying to extend the foreclosure on the rental so you could live there rent free a couple extra months after your primary was foreclosed. Since you included the rental in bankruptcy I believe the lease contract was broken. As such, you would not need to include future rents in your current income calculation since technically the lessee was not required to pay. If the lessee continued to pay then the rents would be considered voluntary payments by the lessee.

[ssmdem]

We haven't filed yet -- just in the preparation stages right now. So, yes, I'm still obligated to pay rents towards the mortgage right now.

[Mizzou13]

I'm not an attorney, but why do you believe you are "obligated" to use the rents to pay the mortgage even before you filed BR?

[ssmdem]

Most mortgages have an "assignment of rents" clause in the mortgage - so if we don't, it could come back to bite us. Just not willing to take that chance --- plus all four attornies we've consulted have said to absolutely keep paying that mortgage with the rent coming in due to primarily the clause above AND also if we don't, that's $1000 extra every month we're receiving in income -- puts us WAY over median at that point.